ACCOUNTING DEPARTMENT
Course:
Professor:
Email:
BAC 332B - TAXATION II / WINTER 2015
Anthony Vallée
avallee@ubishops.ca
COURSE OBJECTIVES:
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This course builds upon the principles and concepts of Canadian income tax introduced
in Taxation I, BAC 331. In particular, it examines the application of income tax law as
it applies to Corporations. Attention is given to effective income tax planning for
shareholder-management remuneration, tax-effective uses of corporations, and capitalgain tax deferrals.
GRADING SCHEME:
Test
Midterm
T2 corporate return
Final examination
10 %
25 %
25 %
40 %
100 %
NOTE:
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Tests and examinations will cover all work completed to date.
Assignments are due at the start of the class indicated. Late assignments will not be
accepted; all assignments should be typed.
You need at least 50% in total in the final examination to pass the course.
No supplemental (assignments, tests or examination).
The only electronic devices allowed will be standard calculators.
Use of a reasonably annotated copy of the Income Tax Act is permitted for the exams.
TEXT:
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Byrd & Chen, Canadian Tax Principles, 2014-2015 Edition, Pearson.
Ernst & Young, Federal Income Tax Act, 2014 (12th Edition).
Lecture notes.
CONTENTS
1. INTRODUCTION AND REFRESHER
1.1
1.2
1.3
1.4
1.5
1.6
Review of the structure of the ITA
Definitions applicable to corporations
Residency of corporations
Procedures and administration
Review of the classification of income
Classification of corporations
References:
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Chapters 1, 2, 5, 6, 7, 8
Chapter 20 (par. 35 to 41)
ITA: 89(1), 125(7), 150, 150.1, 152, 156.1, 157, 163.2, 220,
230, 248(1) “balance-due day”, 250(4)
2. TAXABLE INCOME AND TAX PAYABLE FOR CORPORATIONS
2.1
2.2
2.3
2.4
2.5
2.6
Computation of net income
Computation of taxable income
Basic computation of taxes of all corporations
Corporate rate reductions
Small business deduction
Related persons and associated corporations
References:
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Chapter 12
Chapter 14 (par. 35-50)
ITA: 110.1, 111, 112, 123, 123.4, 124, 125, 181.2, 251, 256
ITR: 400, 401, 402
3. INTEGRATION, TAXATION OF INVESTMENT INCOME, REFUNDABLE
TAXES, OVERVIEW OF GRIP AND LRIP
3.1
3.2
3.3
3.4
3.5
3.6
Integration
Refundable Part I tax on income from investments
Refundable Part IV tax on dividends received
Refundable dividend tax on hand (RTDOH)
Dividend refund
Designation of eligible dividends
References:
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Chapter 13
Chapter 7 (par. 74-100)
ITA: 82, 89, 121, 129, 185.1, 186
2
4. OTHER ISSUES IN CORPORATE TAXATION
4.1
4.2
Acquisition of control
Investment tax credits
References:
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Chapter 14 (except par. 35-50 and par. 74-134)
ITA: 37, 111, 127, 127.1
ITR: 4600
5. CORPORATE DISTRIBUTIONS
5.1
5.2
5.3
5.4
Shareholder’s equity: GAAP, corporate law and tax basis
Dividends (taxable and non taxable)
Deemed dividends
Shareholder benefits and loans
References:
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Chapter 14 par. 74-134
Chapter 15 par. 100-122
ITA: 15, 80.4, 82, 83, 84, 184, 185
ITR: 2101, 4301
6. CORPORATE TAXATION AND MANAGEMENT DECISIONS
6.1
6.2
6.3
Advantages and disadvantages of incorporation
Remuneration : salary versus dividend
Other planning aspects of using Corporations : capital gain
deduction, introduction to estate freeze & brief overview of the
attribution rules
References:
- Chapter 15 par. 1-99
- Chapter 15 par. 123-181
- ITA: 67 and various sections already covered
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7. ROLLOVERS UNDER SECTION 85, SPECIFIC ANTI-AVOIDANCE RULES
AND OTHER ROLLOVER PROVISIONS
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
Transfer of property to a corporation by a shareholder
Restriction on elected transfer price
Application of basic rules
Application of detailed rules
Shareholder’s position
Corporation’s position
Affiliated persons and losses on transfers
Gift to related person
Section 84.1 ITA: Dividends stripping
Section 55(2) ITA: Capital gains stripping
Other rollovers (s. 51, 85.1, 86)
References:
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Chapters 16, 17
ITA: 51, 55, 84.1, 85, 85.1, 86
8. SALE OF AN INCORPORATED BUSINESS, INTRODUCTION TO TRUSTS
AND PARTNERSHIPS
8.1
8.2
8.3
Winding-up of a Canadian corporation and comparison: sale of assets
vs shares
Introduction to Partnerships
Introduction to Trusts
References:
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Chapters 17, 18, 19
ITA: 88(2), 96 to 105
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TAXATION II
IMPORTANT DATES
WINTER 2015
Dates
February 3
Test
February 24
Mid-Term
March 17
Lab session
April 7
T2 return
TBD (April 14?)
Final Exam
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